Experts say buyer beware when it comes to Expedia partner recovery program

As many players across the global travel industry transition from survival mode to recovery mode, the spotlight has been on the giant intermediaries and what, if anything, they are doing to aid suppliers in their revival.

The answers are varied. Some, like Booking Holdings, have thus far not released information publicly about partner recovery plans. In late March, Google announced it had earmarked $340 million in ad credits for small- and medium-size businesses with Google Ads accounts, and the following month it expanded a trial pay-per-stay payment option for Google Hotel Ads.

Airbnb has allotted $250 million to help hosts who have lost money due to COVID-19-related cancellations. And on May 28, Expedia Group announced a $275 million partner recovery program, with $250 million of that coming in the form of marketing credits and a temporary reduction in commission for lodging partners.

We talked to industry experts about Expedia Group’s plan to assess the benefits – and risks. All of those we spoke to agree that in these incredibly difficult and unprecedented times, any help is better than no help. But they also say hoteliers should that choose to participate need to go into it with their eyes wide open.

“This is definitely not a charitable offer by Expedia,” says Klaus Kohlmayr, chief evangelist at IDeaS.

Give and take

The crux of the benefits for lodging partners are twofold: marketing credits valued at 25% of the compensation Expedia Group earned from that property that can be spent on the online travel agency’s ad products, and a 10% reduction in commission on all new bookings for three months. 

To qualify for those benefits, partners must agree to provide Expedia Group with their lowest retail rates, competitive pricing on packages and member-only deals. And that’s a big ask says Infinito founder Fabian Bartnick.

“This is a question of power and control,” Bartnick says.

“If Expedia gets more and more access to more and more information that they don’t normally have access to, they can use that information to make better decisions – and better decisions not for the hotel but in order to make more revenue for Expedia. And you can’t fault them for that.” 

Despite that, hoteliers - especially independent properties and small chains that may have eliminated or reduced marketing staffs and budgets – no doubt will appreciate the credits Expedia Group is offering. (The commission reduction, our experts agree, has little value since it is only 10% and booking volume currently is so low.)

But hospitality and online travel strategist Max Starkov says hotels need to recognize what they are giving up in exchange for participation in the program.

“Your dependency on Expedia will grow exponentially. Because you’ve got nothing to offer of any value to a direct customer. You are giving Expedia the bragging rights to say we have the lowest rates, the best packages and member only rates,” he says.

“But it’s like scraps from the table that Expedia is throwing at them ... better than nothing.”

Starkov says it’s the same dynamic that developed in the wake of previous crises such as 9/11 – independent hoteliers “begging the OTAs for more business.”

“Even the name independent is kind of funny nowadays. You simply have branded hotels and dependent-on-the-OTA hotels. That’s unfortunate but that’s what it is.”

Bartnick says this temporary boost can create a “sugar rush” for hoteliers. “You give the hotel better visibility, they get more bookings and then they are hooked,” he says.

Kohlmayr is a bit more optimistic, saying this is a valuable opportunity for hoteliers to have the “power of an OTA” behind them, but that they should also balance this with strategies to drive direct bookings.

“It’s time to demonstrate to customers about the health and safety measures you are implementing... and the best way to do that is through direct channels, through social media, through your website and other touch points you have created with your guests,” he says.

“And you can create your own opaque packages, you can create things that can attract your most loyal customers to return. You are not 100% tied to give everything to Expedia.”

Wholesale rates

Another element of Expedia Group’s recovery plan is a “streamlined version of its optimized distribution solution” for providing wholesale rates to third-party travel providers, making it easier for hotels to follow Marriott’s decision last September to use Expedia Partner Solutions as the exclusive source for its non-contracted wholesale rates.

The question being asked by experts is how is Expedia Group planning to use those wholesale rates.

“So as long as Expedia adheres to the packaging of those rates together with air, car and anything else that goes into an experience than I feel it would be ok,” Kohlmayr says.

“If they go down the road of taking those wholesale rates and displaying them on their own, that would create a lot of problems for its hotels.”

Bartnick says the wholesale distribution feature is a “brilliant move” on Expedia Group’s part to further position itself between hotels and other resellers. But while Expedia Group describes this streamlined distribution as “designed to increase revenue by favorably positioning supply partners' inventory,” Bartnick questions whether that means increase revenue for the hotels or for Expedia Group.

“If you have the entire rate spectrum at your disposable, you can essentially just put a couple of fences so nobody would actually know when and how you are starting to sell rates and at times even take a loss on the rate just to keep the guest over another OTA,” he says.

“And why do you want wholesale rates right now? You already have the ability on the extranet to set a discounted rate to your normal rates that would only be sold through packages or any kind of bundles that would hide the room rate. So if that already exists why do I need to give you [Expedia Group] access to another discounted rate that is designed for a hotel bed or agent down the block. It doesn’t make sense.”

Large chains

With leisure travel driving the recovery in markets that are opening around the world, Starkov predicts the major hotel chains will need to rely on OTAs more than usual so, like independents, they too will want to participate in this recovery program.

“The major hotel chains unfortunately - with all of their savviness and brand appeal and loyalty programs - still have to master leisure travel,” he says.

“The OTAs are the ones that are the masters of leisure travel, and under the current circumstances when business travel will not rebound any time soon... the big chains will be reliant more on the OTAs.”

But rather than agreeing to the partner recovery program requirements as presented, Starkov says brands such as Marriott, Hilton and IHG are likely talking to Expedia Group about additional concessions and custom agreements. As the crisis eases, he says major chains will regain control of their distribution and will also benefit from an increase in independent hotels wanting to convert to their soft-brand collections. 

“For independents, their fate is very dire,” he says.

“This new program is a very clever additional entanglement of hoteliers to Expedia. And they do not disclose who is participating, but they say all of your competitors are already in. They are exploiting the fear of missing out. This is the modus operandi of the OTAs, and exactly the same thing is happening right now with this program.”